Cognitive biases are systemic errors in thinking that negatively impact decision-making quality and outcomes.

THREAD: 20 cognitive biases to learn (so you can think clearly and make better decisions):
Fundamental Attribution Error

Humans tend to:

(1) Attribute the actions of others to their character (and not to their situation or context).

(2) Attribute our actions to situation and context (and not to our character).

We cut ourselves a break but hold others accountable.
Bandwagon Effect

Humans are a social species - this allowed us to thrive.

But it also has a downside…

It creates a strong tendency to speak, act, or believe things simply because a lot of other people do.

Bandwagon effect is similar to "groupthink" and is very dangerous.
Egocentric Bias

The human tendency is to have a higher view of one's self than is objectively warranted.

In group activities, we tend to overestimate (in comparison to objective measure) the degree and value of our own contributions relative to others.
Naïve Realism

Humans think very highly of themselves (see egocentric bias!).

We tend to believe that we see the world with perfect objectivity (cognitive biases be damned!).

We also assume that people who disagree with us must be ignorant, uninformed, or biased.
Baader-Meinhof Phenomenon

Ever notice that something you just learned seems to pop up everywhere around you?

The Baader-Meinhof Phenomenon says that increased awareness of something creates the illusion that it is appearing more often.

Like seeing 11:11 on your iPhone clock...
Pygmalion Effect

High expectations lead to high performance (and vice versa).

Those who have high expectations placed on them are more likely to internalize these expectations and improve their performance accordingly.

Leaders may attempt to use this to their advantage.
Confirmation Bias

Humans have a tendency to see and interpret information in a manner that supports previously held beliefs.

New data positive? This idea is a slam dunk!

New data negative? Must have been an error in the experiment.

Very common and very dangerous.
Backfire Effect

The "backfire effect" is the tendency for humans to use evidence in direct conflict with their thesis to further strengthen their previously held beliefs.

It is a more dangerous version of confirmation bias (also less common and scientifically contested).

The "anchor" is a reference point of information (usually the first piece of information received on a topic).

All subsequent thinking or decisions are silently "anchored" to this point.

Anchoring has been proven by scientists (and used car salesmen) time and again.
Dunning-Kruger Effect

People with a low ability at a task are prone to overestimate their ability at that task.

Humans are notoriously incapable of objective evaluation of their competency levels.

Remember: Everyone is a genius in a bull market.
The Ben Franklin Effect

"He that has once done you a kindness will be more ready to do you another, than he whom you yourself have obliged."

Doing a favor makes you more likely to do another for that person than them doing a favor for you.

We reinforce our self-perceptions.
Loss Aversion

First identified by famed scientists Amos Tversky and Daniel Kahneman, it says the pain of losing something is more powerful than the pleasure of winning it.

As such, humans will typically do more to avoid losses than they will to seek gains.
Endowment Effect

Related to loss aversion, the endowment effect says that once we have something, we don't want to give it up.

Humans will demand more to give up an object than they would be willing to pay to acquire it.
Availability Bias

Humans evaluate situations based on the most readily available data, which tends to be what can be immediately recalled from memory.

This is how the news cycle impacts our thinking. Its persistent negativity cements a belief that the world is a dark place.
Survivorship Bias

History is written by the victors.

But concentrating on "survivors" and systematically ignoring "casualties" of any situation leads to distortions in our conclusions.

We overestimate the odds of success because we only read books about the successes!
The Ikea Effect

People ascribe significantly more value to objects that they have created or assembled, irrespective of the final quality of the object.

We infuse our own self worth into the object, thereby increasing its value in our minds.
Hindsight Bias

Humans tend to believe that events of the past were more predictable than they actually were.

We examine the past with the benefit of hindsight but fail to recognize its impact on our thinking.

Hindsight bias can meaningfully distort our memories.
Plan Continuation Bias

Humans love plans.

Even when the plan appears to be failing (or no longer an appropriate fit for a given situation), we have a tendency to want to continue.

The dangers of a rigid "stick to the plan!" mentality are very real.
The Gambler's Fallacy

Humans are naturally bad with probabilities.

The Gambler's Fallacy says that we have a tendency to believe that past events alter future outcomes (when they clearly have no impact).

Ever thought you were "due for a win" in roulette. You're falling prey.
Curse of Knowledge

Experts (or generally, intelligent people) tend to make the flawed assumption that others have the same background and knowledge on a topic as they do.

They are unable to teach or lead in an effective manner for those still coming up the learning curve.
Cognitive biases have a profound impact on our thinking and decision-making every single day.

The first step to fighting back? Awareness. I hope this post helped with that!

Enjoy this thread? Follow me @SahilBloom for writing on mental models, business, and more.
I will be turning this thread into a longer-form piece for my newsletter, where I will explore these biases in greater depth (including examples and ways to combat them!).

It will be released in the coming days.

Subscribe below so you don’t miss it!
And if you are a job seeker looking to leverage your improved awareness and decision-making skills to advance your career, check out my curated job board, where I share unique roles at high-growth companies in finance and tech.

New roles every week!…
This thread is going to become a multi-part newsletter series on cognitive biases, including examples of each and practical ways to combat them.

Part I will be released this week.

Sign up here so you don’t miss it:
The Cognitive Biases Handbook (Part 1 of 2) will hit inboxes tomorrow.

I hope it’s a free resource that you can save and come back to whenever you need a refresher!

Sign up here to receive it:
The Cognitive Bias Handbook

The newsletter deep-dive (part 1 of 2) is now live in your inbox and ears! Please enjoy, share, and subscribe if you haven’t already.…

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More from @SahilBloom

Sep 29
You control your attitude and effort—not the results.
Never attach your definition of success to something out of your control.

It’s a dangerous and unfulfilling game to play.

Attach your definition of success to what is in your control.
The greatest disappointments in my life have all come when I had a measure of “success” that was outside my scope of control.

- Getting a new title
- Hitting a certain bonus
- Making some Forbes list

A recipe for disappointment.
Read 4 tweets
Sep 28
Stop waiting for the perfect moment:

• To launch a business
• To pursue a new project
• To start a family

The reality: There’s no such thing as the perfect moment. You'll never feel fully comfortable making a giant leap.

Trust in your preparation and ability to adapt.
The notion that you should wait for the perfect moment to do [X] has paralyzed would-be action-takers for generations.

If you wait for the perfect moment, it may never come.
Perfect moments are for movies:

Everything lines up exactly as planned for the climactic finish.

In real life, there is rarely this level of clarity.

The good news: If you can see one path where it works out, there are probably 10 more that are invisible to you.
Read 7 tweets
Sep 27
A simple way to generate big business ideas:
The approach leverages one of my favorite frameworks:

Clayton Christensen’s Model of Disruptive Innovation

In simple terms, it says that innovators can win market share by serving a segment of the market that is over or underserved by the incumbent’s offering. Image
Basically, upstarts can win by serving one sub-segment of a big market extremely well.

Simply provide the *exact* level of product/service needed and use it as a wedge to expand.

Let’s get tactical…

Here’s how to use the framework to generate business ideas:
Read 12 tweets
Sep 25
Your entire life can change with one year of focused daily effort.
“Most people overestimate what they can achieve in a year and underestimate what they can achieve in ten years.” - Bill Gates

You don't need 10 years to accomplish something spectacular.

You don't need 5 years.

You don't need 3 years.

The change is always just one year away.
This is a great visualization from @JamesClear:

1% daily improvements for an entire year will result in a ~38x improvement by the end of the period.

“A-ha!” moment.

But compounding cuts both ways. If you get 1% worse each day, you're going to be in a lot of trouble…
Read 8 tweets
Sep 24
The 12 Laws of Karma everyone should know:
Most people only understand karma through the common phrase when we see a bad person get what was coming to them:

"Well, karma is a b****!"

But there is a lot more depth to the concept.

Specifically, there are 12 Laws of Karma that are worth understanding:
The Law of Cause & Effect

Whatever you put out, you receive back.

You reap what you sow.

This is also called "The Great Law", as it is the guiding law of karma and what most people think about when they think of the term.
Read 17 tweets
Sep 23
The Feynman Technique for learning anything:

Step 1: Identify a topic
Step 2: Try to explain it to a 5-year-old
Step 3: Study to fill in knowledge gaps
Step 4: Organize, convey, and review

True genius is the ability to simplify, not complicate.

Simple is beautiful.
For more detail, here’s a thread I wrote on the technique:
Broadly, one of the lessons here is that teaching is one of the most powerful ways to learn.

When you’re learning something new, find opportunities to try to explain what you’re learning to a novice.

It cements new learning and exposes the gaps immediately.
Read 4 tweets

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